Official Liquidator of Deccan Cargo and Express Logistics Pvt Ltd., (In Liqn) V. The Deputy Commissioner of Income Tax Circle 11(1) and The Deputy Commissioner of Income Tax, TDS, Circle 16(1) and The Commissioner of Income Tax Central Processing Centre

CA/19/2014

AI Insights

The case involves the Official Liquidator of Deccan Cargo and Express Logistics Pvt Ltd., which was in liquidation, seeking the recovery of an income tax refund from the Income Tax Department. The refund amount of Rs.20,20,651/- was due to the company, but the Department proposed to adjust this refund against the company's tax arrears for the assessment years 2011-12 and 2012-13. The Official Liquidator contested this adjustment, arguing that any such action required the court's permission under Section 537 of the Companies Act, 1956. The court agreed with the Official Liquidator's position, emphasizing that the Department could not unilaterally adjust the refund against the arrears without the court's approval.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 671483 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-06-2015
• Assessment Year: misc
• Laws Referred To: Companies Act, 1956, Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: K S MAHADEVAN; V JAYARAM
• Keywords: Adjustment of Refund; Company in liquidation; Income Tax Refund; Official liquidator; Winding up
• Section: 201(1); 245; 537; 441; 446(2)(b); 446(2)(d); 456(2)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2nd DAY OF JUNE 2015 BEFORE THE HON’BLE MR. JUSTICE ANAND BYRAREDDY COMPANY APPLICATION NO.19/2014 IN COMPANY PETITION Nos.143 & 193/2011 BETWEEN: OFFICIAL LIQUIDATOR OF M/S. DECCAN CARGO AND EXPRESS LOGISTICS PVT LTD., (IN LIQN) ATTACHED TO HIGH COURT OF KARNATAKA CORPORATE BHAVAN, NO.26-27, 12TH FLOOR RAHEJA TOWERS, M G ROAD, BANGALORE 560 001. .. APPLICANT (By Sri K S MAHADEVAN & Sri V JAYARAM, OFFICIAL LIQUIDATORS) AND: 1. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1) 5TH FLOOR, R P BHAVAN NRUPATHUNGA ROAD BANGALORE 560 001 2. THE DEPUTY COMMISSIONER OF INCOME TAX, TDS, CIRCLE 16(1), 4TH FLOOR, NO. 59, HMT BHAVAN, BELLARY ROAD, GANGANAGAR BANGALORE-560 032 2 3. THE COMMISSIONER OF INCOME TAX CENTRAL PROCESSING CENTRE, POST BAG NO.2, ELECTRONIC CITY POST OFFICE, BANGALORE-560 100. .. RESPONDENTS (By Sri K V ARAVIND, ADV.) This company application is filed Under Section 446[2][b] & [d] of the Companies Act, 1956 R/w Rules 6 & 9 of the Company [Court] Rules, 1959, praying that the respondents herein be ordered and decreed to pay to the applicant a sum of Rs.20,20,651/- with interest at 6% per annum from 11.06.2013 to till the date of the judgment and future interest or any other rate fixed by this Hon'ble Court and etc., This application coming on for orders, this day, the Court made the following: O R D E R The learned counsel for the respondent remains absent. It is seen that this Court vide order dated 30.10.2014, has recorded that the respondents in spite of taking sufficient time has not clarified the position as to whether the refund from the Income Tax Department ought to be deposited in the account of the company in liquidation. Time having been granted repeatedly, there is little response from the respondents. It was also recorded by this Court that this Court would be left with no option but to allow the 3 application in the absence of furnishing of details. Inspite of subsequent adjournments, there is little response from the respondents. 2. Heard the learned counsel for the Official Liquidator. 3. The present application in CA.No.19/14 is filed in the following background:- The company in liquidation was ordered to be wound up by this Court by order dated 11.6.2014 in Co.P.No.143 and 193/11. The erstwhile Managing Director of the company in liquidation by his letter dated 19.9.2013 is said to have informed the Official Liquidator that there is an income tax refund of the company to the extent of Rs.20,20,651/- and that the refund draft had been returned with the postal shara that “party had shifted” on account of the registered office of the company being locked. The Official Liquidator 4 is said to have issued a demand notice dated 23.10.2013 to Deputy Commissioner of Income Tax, Circle-11(1), Nrupathuga Road, Bangalore, to pay the amount with interest within fifteen days from the date of receipt of notice. The notice is said to have been duly served on the authority. In accordance with the provisions of Section 456(2) of the Companies Act, 1956, all the property and assets of the company are deemed to be in the custody of the Court from the date of the order of winding up of the company. In terms of the provisions of Section 441 of the Act, the date of winding up order comes into effect from the date of filing of winding up petition. The Deputy Commissioner, Income Tax, Circle 16(1), Bangalore, is said to have replied that the return of income for the assessment year 2012-13 has been processed by the Department and refund is determined and as on date, the total arrears pending in the case amounts to Rs.30,87,260/-, and it was proposed to adjust the refund 5 towards arrears and it was thus intimated, to which, the Official Liquidator had filed his objections to state that in terms of Section 537 of the Companies Act, 1956, it was obligatory to obtain leave of this Court before imposing any attachment, distress or sale of properties of the company against which winding up proceedings are pending and any such action without the permission of this Court would be illegal and void. It is in this background that the present application is filed. 4. It is not in dispute that it has been verified that the refund has been processed by the Department and refund order was to be revalidated as demand draft payable to the Official Liquidator attached to the High Court of Karnataka. It was indeed said to have been communicated by the first respondent to the third respondent, but there was no revalidation of the refund order and the demand draft is yet to be received by the Official Liquidator. It is in this 6 background the present application has been filed and the Official Liquidator claims that he is entitled to recovery of amount of Rs.20,20,651/- with interest at 6% per annum from 11.06.2013 till date with future interest. 5. The respondent-Department has filed its statement of objections to contend that the proceedings under Section 201(1)of the Income Tax Act were initiated by the second respondent for the assessment year 2011-12 and 2012-13 for default committed in not deducting the tax at source in respect of payments made by the assessee and also non-remittance of the tax deducted at source into the Government account and the demand for Rs.2,11,74,015/- for the assessment year 2011-12 and a sum of Rs.1,51,37,049/- for the assessment year 2012-13 was raised and in view of Section 245 of the Income Tax Act which provides for set off of the amount to be refunded or any part of that amount, against the sum, if any, payable under the 7 Act by the person for whom the refund is due, it is claimed that the Department is entitled to adjust the refund amount. Therefore, exercising the power under Section 245 of the Income Tax Act, the respondent has sought for adjustment of the amount. The learned counsel for the Official Liquidator however would submit that even if any such arrears are to be set off against the refund to be made, it is not open for the respondents to unilaterally do so, notwithstanding the power available under Section 245. It is only if leave is granted by this Court that any such adjustment could be made and therefore, the application be allowed and the respondent be directed to refund the amount. In the absence of the respondent seeking leave of this Court to make any such adjustment of the refund amount that is due to the company in liquidation, the respondent is ordered and directed to pay a sum of Rs.20,20,651/- with applicable rate of interest at which the 8 Income Tax Department refunds amounts from 11.06.2013 till the date of payment. Sd/- JUDGE *alb/-. "